In 2009 Switzerland was forced to relax its banking secrecy for foreigners—though not for Swiss residents—under pressure from its European neighbours and the United States to clamp down on tax evaders. The small Alpine country was shocked to find itself on a “gray list” of uncooperative tax havens published in April by the Organisation for Economic Co-operation and Development (OECD) and protested that it had not been given prior warning and that the complaints were unjustified. Switzerland scrambled to have its name be removed from the list by signing double-taxation agreements in less than six months with the OECD’s stipulated minimum of 12 countries, offering to share previously confidential bank documents.

The treaty with the United States stated that any request for administrative assistance had to clearly identify the person concerned, ruling out so-called fishing expeditions to net a wider range of potential tax fugitives. The signing of the treaty followed an agreement in August for Switzerland’s biggest bank, UBS AG, to turn over information on 4,450 accounts of Americans suspected of holding undeclared assets. In return, U.S. tax authorities dropped demands for UBS to reveal the details of all 52,000 of its American clients and said that it would not enforce the “John Doe Summons” authorized by a U.S. court, which sought information on American customers of UBS. “This solution frees UBS and indirectly also our national economy from a sword of Damocles. At the same time, it respects our legal order and our sovereignty,” Swiss Pres. Hans-Rudolf Merz told bankers.

Die-hard defenders of Swiss independence accused the government of buckling under U.S. pressure. Criticism intensified after Swiss authorities arrested filmmaker Roman Polanski on a 31-year-old U.S. arrest warrant stemming from his conviction for having had sexual intercourse with a 13-year-old girl. Polanski was in Zürich to accept an award for his life’s work when he was detained, and his arrest prompted fury from France, where he had made his home.

Merz came under pressure to resign over his handling of a diplomatic spat with Libya. Relations between the two countries had soured in July 2008 when Geneva police arrested Hannibal al-Qaddafi, son of the Libyan leader, on allegations that he and his wife had beaten two servants. He was released several days later, but Libya cut economic and diplomatic ties to Switzerland and detained two Swiss businessmen, allegedly for immigration violations. The Swiss long resisted Libyan demands for an apology, but Merz ultimately traveled to Tripoli in August and apologized to Muammar al-Qaddafi, apparently without having consulted his cabinet colleagues. He returned without the Swiss businessmen, who were subsequently sentenced to 16 months’ imprisonment.

Switzerland faced international condemnation after a November 29 referendum unexpectedly backed proposals by the right-wing Swiss People’s Party to ban the construction of minarets. The 57% majority in favour of the ban was seen as an embarrassment for a country that hosts the European headquarters of the United Nations and where about 4% of the population was Muslim. Campaign posters ahead of the vote featured minarets that resembled missiles standing on top of a Swiss flag flanked by a woman in a burka. On December 2 the Swiss parliament elected Economics Minister Doris Leuthard as president for 2010. She would be the third woman to serve as Switzerland’s head of state.

Switzerland reluctantly ended the freezing of $7 million in assets linked to Mobutu Sese Seko, the late president of Zaire (now the Democratic Republic of the Congo), when a Swiss court ruled that the money had to be returned to his family. Switzerland stated that this was due to the inaction of Congolese authorities to recover the funds through the courts and the refusal of Mobutu’s family to relinquish their claim to the assets, which allegedly had been pilfered from the mineral-rich African country. The Swiss government said that the ruling proved the need for changes in the law, scheduled for 2010, to allow the outright confiscation of illicitly gained assets held by “politically exposed people.”

Switzerland was less affected by the economic recession than some other industrialized countries. A government expert group said that it expected GDP to shrink by 1.7% in 2009 and to recover slightly to 0.4% in 2010. It predicted that unemployment, hovering just under 4%, would rise.

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